Equity Release Schemes - Home Income Plan

Home income plans allow homeowners to release equity built up within their property. Thisrelease of equity, from either a lifetime mortgage or home reversion goes to purchasing anannuity which provides the income for life. The home income plan will pay out an annuity income dependent upon the size of the equity release, annuity rates, your age and gender.

Are Home Income Plans Still Available?

Popular back in the 80's, home income plans were mainly sold during a period of high interest & annuity rates.Originally, the capital sum was provided by a residential mortgage, not an equity release scheme. The annuitypurchased would have been sufficient to fund the monthly mortgage payments & provide extra pension income.Home income plans these days are rare. With annuity rates falling so far, there are better alternatives available.

Do home income plans involve risk?

There are many factors that have now rendered home income plans high risk. Firstly, mortgage rates could risesharply which would 'eat up' more of the annuity income, leaving less for income purposes. Annuity rates are more favourable the older you are. Therefore, the home income plan is more appropriate for people over the age of 70. With annuity rates falling, more of a tax free lump sum is required to provide the same income levels.

The amount of income generated by a home income plan is determined by the purchased life annuity. Annuitieshave their own set of advantages and disadvantages:-

Advantages of home income plans

• The income provided by the lifetime annuity is guaranteed for the rest of your life

• A home income plan annuity usually provides a greater income than a stand alone annuity

• The annuity income can be taken on a level, inflation protected or increasing basis